The delicate balances that are always at play in the American oil and natural gas business will certainly be affected by the war in Israel and industry experts are watching with great interest to see what those effects will be.
That’s according to Texas Independent Producers & Royalty Owners President Ed Longanecker and Odessa oilman Kirk Edwards, who say the results are unpredictable.
“While some of the risk was not embedded, leading to a spike in commodity prices, nothing has materially impacted the supply-demand balance,” Longanecker said from Austin. “Unless we see an escalation in the conflict or sanctions that directly impact Iranian supply, we expect crude oil prices to decline with no meaningful reduction in oil exports.
“That could certainly change, but clearly some are currently reacting to fear and speculation rather than market fundamentals.”
Edwards said the war should prompt the Biden administration to accelerate the snail’s pace it has been taking to refill the Strategic Petroleum Reserve, which it drained to depress the price of gasoline for the mid-term elections last year.
“The Israeli conflict that is breaking out now adds a bright light to our nation’s SPR and the decimation that has happened to it over the last 18 months,” Edwards said. “As badly as the Israelis were caught off guard, so were we in this country on this type of event happening again just like it did some 50 years ago during the Arab Oil Embargo. The same type of event created the SPR in 1975.
“What folks have to realize is that the SPR has to have sour crude oil along with sweet crude to make the perfect cocktail for our U.S. refineries to use in a crisis,” he said. “If this administration does not now understand that there is a crisis breaking out, then our representatives in Congress and the Senate need to get on their podiums today and yell from the high heavens that we need to get oil back into the SPR immediately.”
Edwards explained that the United States doesn’t have enough sour crude, which has a high sulfur content.
“The U.S. does not make enough sour crude, so we have to import more than five million barrels a day of the stuff just to keep our own refineries going,” he said. “Canada is our major supplier, but we still bring in millions of barrels from those same middle eastern countries that cut us off 50 years ago.
“Sure, crude oil prices may be in the $80-$90 range, but that’s a small price to pay for energy security ahead, don’t you think? Come on Biden administration and congressional leaders, think out of your bipartisan, polarizing boxes and get the SPR filling back up today.
“At some two million barrels of oil per day it will still take six months to get us back to where we were just two years ago.”
Edwards said Biden and Congress “should stop playing politics and play for the protection of our American energy supply.
“We can do this, we just need to start now,” he said. “God bless the Israeli people and what they are going through in their lives. This is their 9-11 and we need to be proactive in helping them and securing our own defenses ahead, defenses that need American oil and natural gas.”